I am going to share some steps on how to get out of debt, so you can quit worrying and do something awesome with your life!
But before we get there, let me share something personal with you.
Every month, my business grows a little bit more.
Much of this growth is driven by my desire to experience cool stuff in life. And one really awesome goal is to buy a fully restored Austin Healey 3000.
(Take a look at the pic below. Pretty awesome, right?)
My dad owned an Austin Healey 3000 back in the 60’s. But then he sold it, went to Viet Nam, survived, came back to the states and hasn’t rode around in one of these since…
Eventually I’d like to change that.
But the only way I can change that is by growing my business and avoiding debt like the plague. You see, there are a lot of people who will tell you: “You’re doing well. Just take a car loan. Get that car today!” And while the temptation to go into debt is ever present, there is nothing that will kill your business and lifestyle faster than consumer debt.
I should know.
When I graduated college, I had a student loan bill that made me want to run for the hills. And since I didn’t have money, I decided to pay for stuff with credit cards. That was a bad move. It only took eight months until I racked up 30K in debt!
Living with debt was painful.
I had zero savings and I had no idea how I was going to pay the thousands of dollars I owed. I had no idea how to get out of debt.
1. Accumulate FU Money
Fortunately I came into contact with two successful people in my hometown. They thought differently than I did. For example, one guy owned a bunch of car dealerships and was worth 67 million dollars (not a typo.) Another guy owned a chain of bowling alleys. Having conversations with these folks taught me I was thinking about money all wrong. I cut up credit cards, lived below my means and started saving “FU money.”
I learned the importance of “FU Money.”
You know you have “FU money” when your bank account it so robust, you can walk out of any deal without the fear of starvation. Or maybe a few weeks into a new job you find out your boss is a complete idiot. Wouldn’t it be great if you could just quit?
FU money lets you quit without guilt. And the way you acquire FU money is:
2. Pay Yourself First
When my successful friends first told me about the “pay yourself first” concept, I had no idea what they were talking about. But with practice, I realized the idea is simple.
Paying yourself first works like this: Whenever you get a paycheck, before you pay any bills or fill up your gas tank, set a little money aside and never touch it. That’s all you gotta do.
I know. I know.
If you’re like most people, you probably want to save money but feel too strapped to take action. This is because each month is filled with bills and other unexpected expenses. For this reason, most people put off saving until the end of the month.
Paying yourself LAST never works.
At the end of the month, there is nothing left to save. In other words, there is more month than money. And that’s just no good!
Disclaimer: I am a blogger and a business owner. I am not a qualified to offer legal, tax or financial advice. I am merely sharing the personal strategies I utilized to accumulate a bunch of FU money and get out of debt. These tactics may not be right for you. So, please talk to a qualified professional first.
3. How To Get Out of Debt
One day, I decided to follow a successful friend’s advice. And while it took me a long time, I eventually dug myself out of debt and lifted that financial weight off my back.
Here are the steps that worked for me:
- Write down all monthly income, including paycheck, extra jobs, etc.
- Write down all monthly expenses, including bills, groceries, gas, etc.
- Subtract expenses from income. What do you have left?
- Open a high-interest online savings account.
- Set up automatic withdraws each payday and pretend it is a bill.
By following this system, I was able to create a $1000 dollar emergency fund. Then after one year, I paid off my credit card debt, starting with the smallest debt first. Then after two more years I paid off my student loans. After that, I saved up six months of income. And after that, I spoke to a financial adviser and started investing.
While none of what I described was easy, I managed to get out of debt. I built up some great FU money. I also developed the valuable life-long habit of always paying myself first. FU!
Learning how to manage your own money will give you confidence when you begin growing your blog business. Thankfully, there are many financial software programs and online services to help you stay on top of your finances.
These days I make sure my business money is managed separate from my personal money. And I use online software for both. The awesome folks at Mint help me manage my personal money. I utilize Outright (affiliate, owned by Godaddy) to manage my business money. And if you like these tools, make sure to download a copy of my Blogging Checklist!